FOR IMMEDIATE RELEASE
5th December 2002
GRAINGER TRUST plc
PRELIMINARY RESULTS FOR THE YEAR ENDED 30th SEPTEMBER 2002
HIGHLIGHTS

Profit before tax and exceptional items up from £21.1.m to £44.9m.

Earnings per share up from 42.6p to 84.6p.

NAV up 27% to £17.24, NNNAV up 34% to £12.03.

Total dividend for year 14.18p per share – an increase of 15% for the fourth successive
year.

Strong one-off contribution from our Bromley Joint Venture.
Commenting on the results, Robert Dickinson, Chairman, said:“This is an excellent performance by the Group with our core tenanted residential business
producing a very strong result and profits have been significantly enhanced by the contribution
from our joint venture. Our development and trading activities are progressing well.
The Group’s gearing and financial position provides us with the platform to continue to expand our
activities. However, while we are confident of generating future cashflow and profits we are
currently cautious in our outlook to the market and to the opportunities that are being presented to
us”
Enquiries
Grainger Trust plc
Rupert Dickinson
Chief Executive
020 7795 4700
Andrew Cunningham
Deputy Chief Executive and Finance Director
020 7795 4700/
0191 261 1819
Baron Phillips
Baron Phillips Associates
020 7397 8932
1
GRAINGER TRUST plc:
PRELIMINARY RESULTS FOR THE YEAR ENDED 30th SEPTEMBER 2002
CHAIRMAN’S STATEMENT
Results
Our results for the year reflect the impact of the recent buoyant housing market. Strong sales prices
have produced a significant increase in trading profits in our tenanted residential division and at
Bromley, our joint venture company. At the same time we are making good progress in our
development and trading division.
Profit before tax and exceptional item has more than doubled to £44.9m from £21.1m (restated) last
year, the £23.8m increase coming from a rise in Grainger’s own profits of £8.9m and an improvement
in the contribution from Bromley of £14.9m. The Grainger increase relates primarily to trading profits
in the tenanted residential division. The Bromley improvement arises because of the inclusion of a full
year’s results for the first time and also the profits on the high level of sales that have been achieved as
part of the one-off rationalisation programme of the Bromley portfolio.
The exceptional item of £3.8m, being costs relating to the partial redemption of our Quoted Debenture,
reduces pre tax profits to £41.1m (2001, post exceptional pre tax profits: £17.6m). Earnings per share
increased by 99% from 42.6p to 84.6p.
Your directors are recommending a final dividend of 11.13p per share (2001: 9.68p), payable on 28 th
February 2003 to shareholders on the register at close of business on 7th February 2003. This, together
with the interim dividend of 3.05p per share, will amount to 14.18p per share, (2001: 12.33p), an
increase of 15% for the fourth successive year.
Net asset value per share (“NAV”) has increased by 27% from £13.56 (restated) to £17.24. When
adjusted to take account of contingent taxation and the market value of our debt (“NNNAV”) this falls
to £12.03 per share, an increase of 34% over the September 2001 figure of £9.00 per share.
FRS 19, “Deferred Taxation”, affects this year’s results for the first time. We have restated figures for
the year ended 30th September 2001 accordingly. In our case the standard requires the removal of
deferred tax provisions made in respect of corporate acquisitions. It is particularly relevant to the
accounting treatment of our Bromley joint venture investment as deferred tax provisions amounting to
some £34.9m on acquisition have to be reversed, thereby producing a considerable amount of negative
goodwill i.e. an excess of net asset value over the purchase price. Negative goodwill is released when
properties are sold and so there will be increases in profit before tax in the medium term. There will be
equivalent and almost identical increases in the tax charge. Full details of the effect of the standard are
explained in the notes to this statement.
Bromley Joint Venture
Excellent progress has been made with the rationalisation of the BPT portfolio. Since acquisition, total
sales of £373.8m have been achieved, of which £332.9m have been completed in the 12 months to 30th
September 2002. By the year end we had sold almost 3,700 residential units, equivalent to
approximately 30% of the 11,204 units at the time of acquisition. As a result Grainger Trust has
received cash receipts of £32.6m from loan stock interest and repayments in the year. Two major
transactions referred to in the interim announcement were completed in the second half. The first was
the sale of a £70m portfolio of assured tenancies to Schroders Residential Property Unit Trust
(“ResPUT”). The second was the refinancing of a significant proportion of the life tenancy portfolio.
2
These transactions have been structured so that BPT receives a fee for the ongoing property
management and, in the case of the life tenancy portfolio, retains the long term reversionary interest,
subject to a 20% carried interest held by our advisers to the transaction. Grainger also receives an asset
management fee from the Schroders ResPUT. As part of these arrangements we invested £7m in fund
units. The Bromley portfolio now includes a lesser number of non-core assets (ie non regulated
tenancies). For 2003, therefore, we are not budgeting that the level of sales achieved this year will be
repeated.
As a result of the successful sales programme year end net debt in the joint venture fell from a peak of
£602m to £438m at 30th September 2002, of which £43m relates to the life tenancy refinancing and
£395m to the original funding. This debt was raised on acquisition finance terms and was due for
repayment in May 2003. We are in the process of renegotiating the loan on terms more appropriate to
long term financing. This should allow a further cash distribution to us and our joint venture partner.
Grainger – Tenanted Residential
This division has benefited from the strong residential market during the year to 30th September 2002.
We have noted some recent slowing in the market, particularly in London and the South East but prices
in other regions of the UK continue to rise. We are, however, conscious that the rate of increases seen
recently cannot be sustained in the long term and we are, therefore, being increasingly cautious in our
response to market conditions and to opportunities that are presented to us.
During the year we sold 785 properties for a gross consideration of £51.0m (2001: 735 properties for
£36.3m). While these figures are distorted by a small number of very high value sales, we have seen a
20% increase in average house sales price achieved. Trading profits rose by 41.2% from £16.5m to
£23.3m and net rents by 23.7% from £7.6m to £9.4m. Total operating profits for the division amounted
to £30.0m (2001: £22.2m)
We are particularly pleased with the volume and quality of tenanted residential stock that we have been
able to purchase this year as this lays the foundation for future profit generation. Our total spend
amounts to £85.8m (2001: £28.0m) and the open market value of our stock at the year end amounted to
£393.6m (2001: £287.7m). However, stock units have reduced marginally from 4,946 to 4,928 because
of the large volume of sales of ex industrial low value housing to investors, at prices in excess of vacant
possession value. This sales programme is now largely complete.
Grainger – Development and Trading
The division continues to make good progress. We have sold all four warehouses at our award-winning
Thurrock scheme for a satisfactory profit. We also sold 7 acres of housing land at Kennel Farm,
Basingstoke in the second half of the year (2001: 15 acres) and a further 7 acres since the year end. We
are now left with a total of 23 acres at Kennel Farm of which 11 acres are sold on conditional contracts
over the next two financial years.
Construction of our two main developments, Landmark Place, our mixed use scheme in Slough, and an
apartment block at the former Pimlico bus station, is proceeding well. We are aware of the current poor
state of the office market in the Thames Valley area but are confident that the quality of the Landmark
Place project allied to its excellent location and favourable car parking provision will enable us to
achieve a satisfactory outcome. Forward sales on the Pimlico development are extremely encouraging.
We do not currently anticipate a significant contribution from any of our commercial development sites
next year.
We are pleased at the progress that Grainger Homes, our new housebuilding division, has made in the
year. On its first two sites a total of 34 units have been sold or reserved and there are several other sites
in the development pipeline.
3
Operating profits for this division have decreased from £13.8m to £12.0m, largely as a result of the
reduced sales programme at Kennel Farm.
Financing and Taxation
At the year end net debt stood at £223.3m (2001: £200.9m) and gearing on a revalued balance sheet
basis fell to 52.3% from 60.0%. Net assets have grown to £426.7m, an increase of £92.1m of which
£17.4m relates to retained earnings and £74.7m to increases in the value of our assets.
Favourable interest rates and the repayment of some of our expensive fixed rate debt has reduced the
interest rate on our year end debt to 6.3% from 7.2%. As part of this repayment programme we
redeemed £6.9m of our Quoted Debenture, leaving £2.8m still in issue. Net interest payable in the year
has decreased from £15.1m to £10.7m. This is attributable to an increase in loan stock interest
receivable from Bromley to £6.0m from £1.1m.
The current low level of short and medium term interest rates has increased our FRS 13 (mark to market
value debt adjustment) adjustment to 48p from 29p. Of this, 14p (2001: 7p) relates to our share of
Bromley.
Our effective tax rate is 49.2% (2001: 40.3%) and this high figure is the result of the implementation of
accounting standard FRS 19. The effect is to increase both pre tax profits (from the release of negative
goodwill arising) and the tax charge and it is particularly pronounced in this year because of the very
high level of sales at Bromley. The effective tax rate for Grainger, excluding the effect of the joint
venture, is 34.2% (2001: 30.0%).
People
The executive team has been reshaped following Stephen Dickinson’s appointment as part time nonexecutive Deputy Chairman with executive responsibility for land development. Rupert Dickinson is
Chief Executive and Sean Slade has been appointed to the board as Director of Development. We are
pleased to announce that Andrew Cunningham is to be promoted to a joint role of Deputy Chief
Executive and Finance Director with immediate effect.
It is opportune to pay credit to and to thank Stephen for his very significant contribution to Grainger
Trust since his appointment as Managing Director in 1974. Not only has the group produced an
enviable record of growth and profitability but he has left a solid platform for continued success in the
future.
Your board is confident that the executives, supported by a highly competent and entrepreneurial
management team, will not only meet the challenges of the changes in the scale and complexity of the
Group’s affairs, but can capitalise on them. We are very grateful to all our staff for their excellent
performance in the year.
Prospects
Due to the one off nature of the Bromley sales programme we do not anticipate the level of pre tax
profitability achieved this year to be repeated in 2003. However, the Group has an excellent portfolio
of good quality assets and the core business, represented by our tenanted residential stock and our
exposure to similar assets in Bromley, is highly cash generative and produces robust returns. This is
counterbalanced by the entrepreneurial nature of our development and trading activities. Our relatively
low level of gearing will enable us to take advantage of attractive opportunities as they present
themselves, provided they meet our investment criteria based upon high levels of return allied with
rigorous risk control. We believe we are well placed to deliver attractive returns to shareholders in the
future.
Registered Office:Robert Dickinson
CHAIRMAN
Citygate
St James Boulevard
NE1 4JE
5 December 2002
4
GRAINGER TRUST plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30th SEPTEMBER 2002
Year
Ended
30.09.2002
£'000
Year
Ended
30.09.2001
Restated
£'000
213,847
(110,339)
124,718
(25,415)
103,508
99,303
21,954
33,679
425
23,177
26,451
330
56,058
49,958
(9,673)
(4,369)
(10,009)
(3,976)
Group operating profit
Share of operating profit in joint venture
(after £97,000 amortisation of goodwill (2001 : £18,000) )
42,016
35,973
32,951
7,863
Total operating profit : group and share of joint venture
74,967
43,836
131
7,392
7,523
1,726
359
2,085
82,490
45,921
(10,668)
(3,767)
(26,945)
(41,380)
(15,137)
(3,487)
(9,715)
(28,339)
41,110
17,582
(20,225)
(7,079)
Profit on ordinary activities after taxation
20,885
10,503
Dividends
(3,507)
(3,042)
Retained profit for the year
17,378
7,461
Turnover (including share of joint venture)
Less: Share of turnover of joint venture
Group turnover
Gross rentals
Trading profits
Other income
Less:
Property expenses
Administration expenses
Net profit on disposal of & provisions against fixed assets
- Group
- Joint venture
Profit on ordinary activities before interest and taxation
Net interest payable and similar charges
- Group normal
- Group exceptional
- Joint venture
Profit on ordinary activities before taxation
Tax on profit on ordinary activities
-
Earnings per share
Diluted earnings per share
All results relate to continuing operations.
5
84.6
p
84.2
p
-
42.6
p
42.4
p
GRAINGER TRUST plc
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30th SEPTEMBER 2002
Year
Ended
30.09.2002
£'000
Year
Ended
30.09.2001
Restated
£'000
20,885
10,503
(398)
(2,020)
464
107
64
400
21,015
8,990
-
(179)
7,762
3,045
Total gains and losses recognised - group and joint venture
28,777
11,856
Prior year adjustment
- Group
- Joint venture
(1,932)
(850)
Total gains and losses recognised since the last annual report
25,995
Profit for the financial year
Taxation on realisation of property revaluation gains of previous years
Unrealised surplus on revaluation of properties
Diminution transferred from revaluation reserve to profit and loss account
Total gains and losses recognised – group
Share of joint venture tax on realisation of revaluation reserves
Unrealised surplus on revaluation of joint venture properties
6
GRAINGER TRUST plc
CONSOLIDATED BALANCE SHEET
AT 30th SEPTEMBER 2002
30.09.02
£'000
30.09.01
Restated
£'000
(858)
21,718
(1,001)
27,567
306,951
(281,092)
418,161
(404,373)
Goodwill
25,859
326
13,788
423
Loan to Joint Venture
26,185
13,735
14,211
40,000
39,920
8,882
54,211
834
48,802
55,045
69,662
81,611
305,059
3,541
10,477
234,359
5,197
23,090
319,077
262,646
22,257
30,145
31,312
19,618
Net current assets
266,675
211,716
Total assets less current liabilities
336,337
293,327
Creditors: amounts falling due after more than one year
211,481
192,652
3,747
4,979
121,109
95,696
Capital and reserves
Called-up share capital
Share premium account
Revaluation reserve
Capital redemption reserve
Profit and loss account
6,186
21,364
11,620
185
81,754
6,170
20,800
10,112
185
58,425
Equity shareholders' funds
121,109
95,692
-
4
121,109
95,696
Fixed assets
Intangible assets
Tangible assets
Investments :
Investment in joint venture:
Share of gross assets
Share of gross liabilities
Other investments
Current assets
Stocks
Debtors: amounts falling due within one year
Cash at bank and in hand
Creditors: amounts falling due within one year
Short term borrowings
Other creditors
Provision for liabilities and charges
Deferred taxation
Net assets
Minority interests
Total capital employed
7
GRAINGER TRUST plc
CASHFLOW STATEMENT
FOR THE YEAR ENDED 30th SEPTEMBER 2002
Year
Ended
30.09.2002
£'000
(18,293)
Year
Ended
30.09.2001
Restated
£'000
25,174
7,618
(18,570)
(3,767)
29
380
(18,976)
(3,487)
23
(14,690)
(22,060)
Taxation
UK corporation tax paid
(8,149)
(8,509)
Capital expenditure and financial investment
Purchase of fixed asset investments
Purchase of tangible fixed assets
Sale of fixed asset investments
Sale of tangible fixed assets
Repayment of loanstock
(8,119)
(845)
66
7,138
26,265
(639)
32
39,994
-
24,505
39,387
(222)
180
(56)
(42)
(1,560)
(54,201)
(1,700)
(54,201)
(3,141)
(2,729)
Cash outflow before financing
(21,468)
(22,938)
Financing
New loans raised
Repayment of loans
Issue of shares
47,100
(38,392)
147
85,923
(47,512)
68
8,855
38,479
(12,613)
15,541
Reconciliation of operating profit to net cash (outflow) / inflow from operating activities
30.09.02
£000
Operating profit
42,016
Depreciation
220
Amortisation of goodwill
(445)
Decrease in debtors
1,047
Increase in creditors
7,892
Increase in stocks
(69,023)
30.09.01
£000
35,973
197
(309)
3,454
61
(14,202)
Net cash (outflow) / inflow from operating activities
Returns on investments and servicing of finance
Interest received
Interest paid
- normal
- exceptional
Dividends received
Acquisitions and disposals
Purchase of subsidiaries
Sale of subsidiaries
Costs on purchase of subsidiaries
Cash disposed of on sale of subsidiaries
Investment in Joint Venture
Equity dividends paid
Net cash inflow from financing
(Decrease)/increase in cash in the year
Net cash (outflow) / inflow from operating activities
(18,293)
25,174
NOTES TO THE RESULTS ANNOUNCEMENT
1.
FRS19 “Deferred taxation”
This standard prohibits the making of provisions for contingent tax liabilities on revaluation
surpluses on the acquisition of companies. It had previously been our and industry practice to make
partial provision for such liabilities as part of the fair value exercise on acquisition. We have
therefore recalculated the fair value of assets and liabilities on acquisitions made in recent years by
removing these provisions, thereby creating negative goodwill on most of these transactions. This
negative goodwill is released to the profit and loss account as the properties within the companies
are sold. There is also a greater tax charge on such sales as there is no brought forward contingent
tax provision available to be utilised in its reduction. The Group is particularly affected by the
restatement of the Bromley JV acquisition. The impact on the key indicators of the Group’s results
are set out below:The negative goodwill provision as at 30th September 2001 was £28m. This has been increased by
the transfer of the contingent tax provisions of £35m to make a total as at the start of the year of
£63m. Virtually all of this relates to the JV. As mentioned above this restates and increases the
NAV brought forward as at 30th September 2001 to £13.56 from £12.22 per share.
This negative goodwill is released to profit before tax as the relevant properties are sold. During the
year, our 50% share of the release in the JV amounted to £14.7m. NAV is reduced by that amount
in the current period, and will be similarly reduced in future periods. The great majority of the
negative goodwill provision relates to JV regulated stock. The group tax charge as a percentage of
reported profits increases because there is no provision on acquisition to be used. Our 50% share of
the “excess” tax charge so arising in the period amounts to £14.2m.
The effect on NNNAV is relatively immaterial as this measure is calculated by deducting the full
amount of contingent tax both before and after FRS19.
In the medium term we will continue to see the impact of the standard through increased reported
pre tax profits and unusually high levels of tax charged as a percentage of profits, until the
relevant properties are sold out of the Group and the negative goodwill provision is fully released.
2. Net Asset Value Per Share (NAV)
This consists of balance sheet equity plus the excess of market value over book cost of trading stock,
together with the excess of market value over book cost of the Group’s share of the joint venture in
Bromley Property Holdings Limited.
NAV at 30th September 2002 before the adjustments referred to below was £17.24 (2001 restated:
£13.56).
Two proforma adjustments are commonly made to NAV:
i)
Contingent tax
This is the tax that would be payable if all Group and Joint Venture properties were
disposed of at valuation, and amounts to £4.73 per share (2001: £4.27 restated).
ii)
FRS13
This records the difference between the current market value of fixed rate debt and
derivatives and their book values. After allowing for tax, this adjustment is 48p (2001:
29p).
This results in a net net net asset per share (NNNAV) of £12.03 (2001: £9.00).
9
3.
Pro Forma Net Asset Statement
30.09.02
£'000
30.09.01
Restated
£'000
Properties at market value:
Tenanted Residential
Development and trading
393,602
132,169
287,683
140,107
Total properties
525,771
427,790
Investments
Other assets
Cash
153,838
673
10,477
126,436
612
23,090
Total assets
690,759
577,928
(233,738)
(26,604)
(3,747)
-
(223,964)
(14,421)
(4,979)
(4)
(264,089)
(243,368)
426,670
334,560
£17.24
£13.56
Debt
Net current liabilities
Deferred tax
Minority interest
Market Value Net Assets
NAV per share
The above statement is for information only. It will not form part of the statutory accounts and is
unaudited.
4.
5.
Earnings Per Share
The calculation of earnings per share is based on the following number of shares:
30.09.02
No. of
Shares
000’s
30.09.01
No. of
Shares
000’s
Weighted average number of shares for basic earnings per share
24,682
24,660
Weighted average number of shares for diluted earnings per share
24,808
24,779
30.09.02
£’000
30.09.01
Restated
£’000
Group:
Normal
On exceptional interest and similar charges
10,609
(1,130)
6,762
(1,046)
Share of joint venture
9,479
10,746
5,716
1,363
20,225
7,079
Taxation
Tax on profit on ordinary activities:-
10
6.
Dividends
Dividends on ordinary shares:-
Interim paid of 3.05p per share (2001:2.65p)
Final proposed of 11.13p (2001: 9.68p per share)
30.09.02
£’000
30.09.01
£’000
752
2,755
653
2,389
3,507
3,042
7.
This announcement does not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. Statutory accounts for the year ended 30th September 2001 have been filed
with the Registrar of Companies. The auditors have reported on those accounts; their report was
unqualified and did not contain any statement under Section 237(2) or (3) of the Companies Act
1985.
8.
Copies of this statement can be obtained from the Company’s registered office, Citygate, St. James’
Boulevard, Newcastle upon Tyne. NE1 4JE. Further details of this announcement can be found on
our website, www.graingertrust.co.uk.
9.
The Board of Directors approved this preliminary announcement on 5th December 2002.
Ends.
11